Experts blame high demand, short supply and lack of salary benchmarking
Global demand for professionals with artificial intelligence skills is driving wages sharply higher, with experts warning that the lack of standardised salary benchmarks is pushing pay premiums even further.
The wage premium for AI-skilled professionals is going as high as 25% in some parts of the world, according to a PwC report last year.
It found that wage premiums for AI specialists in the US reach an average of 25%, but can go up to 53% for database designer and administrator roles.
Why are wage premiums surging?
Experts at Korn Ferry attributed these premiums to the combination of AI talent demand and the lack of clear salary benchmarks.
Don Lowman, leader of Korn Ferry's Global Total Rewards practice, said the high premiums indicate that firms are urgently adopting AI technology and finding talent skilled in the field.
"The fear of the unknown is causing them to pay a premium for scarce skills that they lack," Lowman said in a new insight report.
The competition for AI talent is also a factor, according to the experts.
Findings from Bain & Company earlier this year showed that AI-related job postings have surged by 21% annually since 2019, with compensation for these roles also going up by 11%.
However, the report estimates a shortage of AI talent by 2027 if demand continues to go up, with Germany potentially seeing the biggest gap.
"The reality is that firms will need to pay what they need to pay to bring in relevant talent," said Tom McMullen, leader of Korn Ferry's North America Total Rewards expertise group, in the insight.
Lack of salary benchmarks
Another contributing factor is the lack of salary benchmarks in the new field, according to the experts.
Jeff Constable, co-leader of the Global Financial Officers practice at Korn Ferry, said compensation for new fields or disciplines is always higher because there are no established peer groups or market data to benchmark salary ranges, bonuses, and incentives.
But he noted that they tend to go down over the long term.
"At some point, the premiums will go down," he said.
Alternatives to huge wage premiums
With wage premiums surging, the Korn Ferry experts acknowledged that not every employer can afford to hire in-demand talent.
"Firms will need to get more creative with their recruiting and retention efforts," the experts said in their insight.
This could mean delaying compensation by equity or offering retention bonuses and profit-sharing options.
Paul Fogel, sector leader for professional search in the Software practice at Korn Ferry, also suggested providing flexibility, work-life balance, and putting more emphasis on brand reputation instead of pay.
Employers should also consider offering career development opportunities, as well as opportunities to pursue passion projects or new concepts.
"Offering outlets for AI talent to pursue their creativity is a big draw," Fogel said in the insight.
